For sake of simplicity, let’s imagine the entire financial market as a pool filled with different assets that you can invest in.
In the shallow end of the pool you’ll find low risk, low reward investments like government bonds.
In the middle part of the financial market pool, you’ll find medium risk, medium reward investments such as “value stocks”.
In the deep end of the financial market pool, you’ll find high risk, high reward investments like Bitcoin.
🤷♂What moves financial markets?🤷♂
Investors are constantly trying to maximize rewards while keeping risk at a minimum.
This is why most investors have exposure to assets in all depths of the pool – government bonds, value stocks, growth stocks, and crypto like Bitcoin.
Most investors will periodically adjust their portfolios depending on market stability. If the markets are stable, they make more risky investments. If the market is unstable, they move to safer investments.
Market stability and even growth can be artificially sustained through government stimulus alone. This tends to increase the wealth anyone holding assets like stocks both directly and indirectly.
⌛Long term Bitcoin price movers⌛
Bitcoin itself was designed to do this but has since become more of a store of value than a currency. This is because Bitcoin has a maximum supply of 21 million BTC.
This makes BTC akin to gold, which also has a limited supply. Although new BTC is mined about every 10 minutes, the amount of new BTC being mined is cut in half about every four years.
Assuming demand stays the same, this 50% reduction in supply would lead to a doubling in price roughly every 4 years.
Demand for Bitcoin been increasing gradually over the years, creating a predictable 4-year boom-bust cycle.
📅Short term Bitcoin price movers📅
The first factor to look out for is the amount of BTC on cryptocurrency exchanges. The less Bitcoin there is, the easier it is for Bitcoin to move to the upside.
Bitcoin whales are the second factor to keep in mind when analyzing Bitcoin’s short term price action. Whales can move large amounts of cryptocurrency to exchanges, crashing the price when they sell.
The third short term factor in Bitcoin’s price is liquidations on futures exchanges. Exchanges will liquidate overleveraged positions to remain solvent, adding more sell pressure when prices drop.
Elon Musk was recently responsible for a BTC price pump of $5000 within an hour! What’s currently going on in the markets is truly crazy…
